Bakken Update: Buyout Candidates For The Second Half Of 2012 Part III

Includes: CLR, COP, CVX, WLL, XOM
by: Michael Filloon

On January 1 of this year, I covered my Bakken stock picks for 2012. This four-part series covered my favorite Bakken plays for this year. GeoResources worked real well as it was bought by Halcon (NYSE:HK). Other names I liked were Oasis (NYSE:OAS), Kodiak (NYSE:KOG), Northern Oil (NYSEMKT:NOG), and Triangle (NYSEMKT:TPLM). Of these four, Oasis and Kodiak have the best chance of being purchased. That's not to say that Triangle and Northern Oil are not good investments, because these two are. But there may be better ways to play a Bakken buyout.

ConocoPhillips (NYSE:COP) and Exxon (NYSE:XOM) currently have operated acreage in the Williston Basin. Conoco operates as Burlington, and Exxon as XTO Energy. Conoco has approximately 460,000 and Exxon 410,000 net acres in the Williston Basin. Both have been very successful, doing a quality job of drilling and completing wells throughout the play. Conoco and Exxon are leaders here, even though acreage totals place these two in 7th and 8th place, respectively, with respect to Bakken/Three Forks exposure.

Conoco's largest number of wells have been completed in Cedar Hills Field. This is located in the southwestern corner of North Dakota. This area is not prospective of the Bakken/Three Forks, but the Red River formation. Here are other fields it is active in and their location.

COP Williston Basin Activity

Field Location IP Rate (BO/D)
Crooked Creek SW Dunn 2064
Murphy Creek Central Dunn 2107
Corral Creek North Dunn 1350
Little Knife NW Dunn 1806
Haystack Butte East McKenzie 2993
North Fork NE McKenzie (Grail) 805
Pershing NE McKenzie (Grail) 765
Blue Buttes NE McKenzie (Grail) 2806
Johnson Corner NE McKenzie (Grail) 1620
Clear Creek NE McKenzie (Grail) 2325
Elidah NE McKenzie (Westberg) 2108
Union Center NE McKenzie (Westberg) 3325
Westberg NE McKenzie 2884
Keene NE McKenzie (Westberg) 3591
Charlson NE McKenzie (Westberg) 5130
Sand Creek NE McKenzie (Westberg) 2892

It should be noted North Fork and Pershing Fields have not had a recent well result and will have completions in the mid to high 2,000 range. Burlington had made some big changes to its completion methods in early 2011 and it has paid dividends. These fields are very close to QEP's new acreage in McKenzie County. Burlington has more acreage than this in other areas, but the fields listed above have seen the bulk of development.

Exxon's development in the Bakken is a little more spread out. It is in a combination of fields throughout the Williston Basin.

Field Location IP Rate (BO/D)
Mondak SW McKenzie 1470
Heart Butte NE Dunn 2331
Lost Bridge NW Dunn 1971
Haystack Butte NW Dunn 1467
Bear Den NE McKenzie (Grail) 1572
Indian Hill NW McKenzie 1087
Grinnell SE Williams 2315
West Capa SE Williams 1359
Capa SE Williams 756
Dollar Joe SE Williams 1592

Exxon is working over a larger area. The most interesting issue with its acreage is how much it looks like Kodiak's. Its SE Williams prospect is in the same general area as Kodiak's new acreage in the Polar prospect. Its NE Dunn acreage and SW McKenzie are as well. Its Mondak results have been very good given the geology in the area. This will be important to watch going forward.

Exxon, Conoco and even Chevron (NYSE:CVX) will be looking for big purchases if and when it begins to acquire acreage. The companies will be looking for acreage on and around the Nesson Anticline as most of the big players have done. This is why Continental (NYSE:CLR) becomes interesting. It has approximately 1 million acres, and continues to add. Of this acreage, a very large portion is in the vicinity of the Nesson Anticline. Although I find it hard to believe that Harold Hamm would be motivated to sell, all three companies could come up with the $19 billion to purchase this company. This would be a great introduction to the Bakken for Chevron. Whiting (NYSE:WLL) is another target. It has 712,000 net acres in the Bakken, but its acreage position differs from Continental and the company would be easier to buy. Whiting's acreage is not as good, but still interesting. Its Sanish acreage is probably its best from a Bakken/Three Forks standpoint, but its Tarpon acreage has the best well to date in the Bakken. It also has the largest acreage position with the Pronghorn Sands as the main target. All three could also be interested in Oasis and Kodiak. It is safe to say that at least one of the Big Three will be the top lease holder in the Williston Basin sometime in the future.

Disclosure: I am long TPLM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is not a buy recommendation.